Many things about today's rally feel good for the bulls: strong volume, solid breadth and an accompanying selloff in safe havens like gold and Treasuries.
BUT, one thing that is troubling traders about this rally is the apparent reason for its existence: Vikram Pandit. The Citigroup CEO's leaked internal memo where he boasts to employees that the current quarter so far is the firm's best in a year and half has made Citigroup the best performer in the Dow average and financials the best sector in the S&P 500.
"I fail to see this as a foundation for a strong rally," said Tim Seymour, FM trader and managing partner at Seygem Asset Management. "People really want to believe the financials are OK, plus the market was very oversold."
So if this is just a rally in a bear market and not THE rebound, how far does it have to go? Our friends at Bespoke Investment Group note that there have been four 10 percent-plus rallies since this bear market began, with the average gain being about 17 percent. That would put the S&P 500 at around 791.
Guy Adami, FM trader and managing director at Drakon Capital, thinks the real test for the S&P 500 will come around 741. The level was support in the past, but should now be big resistance, notes Adami.
So if we get through the 741 level, you can start to feel better. But don't get the party hats out yet. We had a bounce of 24 percent from Nov. 20 to Jan. 6 before the selling took over again and the index returned to even lower lows.
While the whole market may not have bottomed, there is one sector making a case that the worst is over. Tune to Fast Money tonight for the answer.
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